Oversight Board Certifies $20.2 Billion Fiscal Year 2020 Budget for the Central Government of Puerto Rico

Budget presentation: (link here)

San Juan, PR – July 1, 2019 – The Financial Oversight and Management Board for Puerto Rico announced that it certified a fiscal year 2020 consolidated budget of $20.2 billion, including General Fund, Special Revenue Fund and Federal Funds.

The budget ensures adequate funding for government services and focuses resources on priorities of public safety, healthcare, and education. It secures pensions now and enables them to be secured in the future. It maximizes the potential of federal disaster funding and includes significant capital expenditures to improve Puerto Rico’s infrastructure, while continuing to right-size the government with efficiencies in personnel and non-personnel spending.

“Certifying a fiscally responsible and transparent budget is one of the Oversight Board’s most important responsibilities under PROMESA,” said the Oversight Board’s Chairman José B. Carrión. “The budget for the fiscal year 2020 matches spending to the Government’s priorities in critical areas, ensures fiscal responsibility, and improves transparency.”

The central government budget includes:

    • The $9.1 billion General Fund, which is the fund the government uses for its day-to-day operations. The General Fund increases by about 3.4% from the previous fiscal year, reflecting the need to cover healthcare costs in light of the reduction of federal Medicaid appropriations, and an increased focus on public safety.
    • The $3.5 billion in Special Revenue Funds, which is comprised of revenue the government generates from fees and services dedicated to particular uses, reflects a more than 30% increase. This increase is partly a result of including previously unbudgeted expenses to ensure transparency of all government spending going forward.
    • The $7.6 billion in Federal Funds, reflecting a more than 17% decline in expected funding from the U.S. Government, primarily as a result of reduced appropriations to fund the Island’s Medicaid program.
The budget prioritizes spending in areas identified as government priorities, including:

    • $4.3 billion for healthcare, reflecting continued agency consolidation and personnel efficiencies, as well as critical investments, including $25 million for the Comprehensive Cancer Center, $12 million over two years to enable the Psychiatric Hospital to increase standards of care and achieve Medicare certification, and $6 million in targeted investments of equipment and medical products.
    • $2.9 billion for education to improve educational outcomes – reducing the achievement gap in proficiency tests and improving the graduation rate – and reflecting savings from the schools that have already been closed in previous years that reflect the decline in students. Teachers and school directors will receive a salary increase of $500 a year in addition to the $1,500 and $5,000 increase they received in fiscal year 2019, respectively.
    • $2.6 billion in PayGo that ensures central government pensions are fully paid.
    • $1.1 billion directed to public safety, which includes pay increases for police and firefighters and money for new equipment for both groups. Police officers will receive a 30% salary increase over two years; firefighters will receive a salary increase of $1,500 in the 2020 fiscal year.
    • $46 million in employer social security contributions for police officers, teachers, and judges who have not been covered previously under Social Security and would enroll during the 2020 fiscal year.

The central government budget continues to support the right-sizing of the Government of Puerto Rico to ensure that government agencies deliver services more efficiently and that the government is more appropriately sized to the population. The government’s payroll expenses decrease 11% across fund types, to $3.8 billion.

In addition, General Fund budget savings include a roughly 10% reduction from the previous year in the government’s back office expenses. The General Fund budget also includes a 30% cut in professional services expenses, and an about 13% reduction in spending for the Legislature to bring it in line with other states’ spending on full time legislatures. Moreover, the Oversight Board reduced its own budget by 11% to fund payroll increases for the Department of Health and Emergency Medical Services, as well as funds to cover salary increases for firefighters.

Puerto Rico needs significant investments to rebuild and make infrastructure competitive and a strong base for economic development. The budget ensures significant capital expenditures to improve public safety, public works, housing and education. The capital expenditures in the General Fund alone increase 38%, to $298 million. Including Federal Funds, capital expenditures for the central government totals $942 million in fiscal year 2020.

The budget also reflects a significant improvement in fiscal transparency, which allows the people of Puerto Rico to have a better understanding of what the government spends money on. For the first time, the budget includes appropriations for the Municipal Improvement Fund, the Municipal Development Fund, and the Municipal Finance Corporation, which together total $209 million. All cash subsidies to industry, including the Rum Excise Tax cover-over that subsidizes rum production and the Rums of Puerto Rico subsidy to promote Puerto Rican rum, are also detailed in this budget to present the most accurate picture of spending and ensure fiscal responsibility.

“The budget the Oversight Board certified is a budget that the Government of Puerto Rico can afford and that provides sufficient funds for the services the people of Puerto Rico need and deserve,” Carrión said. “The Government has to remain within this budget to comply with the fiscal plan. That is the law under PROMESA.”

The Oversight Board also certified the fiscal year 2020 budgets for four instrumentalities: the Puerto Rico Electric Power Authority (PREPA), the University of Puerto Rico (UPR), the Puerto Rico Aqueduct and Sewer Authority (PRASA), and the Puerto Rico Highways and Transportation Authority (HTA).

A copy of the fiscal year 2020 budgets can be found at the Oversight Board’s website www.oversightboard.pr.gov